Old plans won't cut it, Madonsela tells Ramaphosa on limping economy

President Cyril Ramaphosa. (Gallo Images/Sowetan/Esa Alexander)
President Cyril Ramaphosa. (Gallo Images/Sowetan/Esa Alexander)
  • Professor Thuli Madonsela says South Africa needs the economic reforms it has never tried before to recover from the Covid-19 pandemic.
  • The former public protector says while the Constitution ensures equality for all, economic inequalities have endured.
  • She has commissioned a report which proposes seven strategic interventions to boost economic growth and cut unemployment. 

Former public protector and law trust chair at Stellenbosch University, Professor Thuli Madonsela, says South Africa must attempt reforms it has never tried before to steer itself out of the dead end it finds itself in.

Madonsela was speaking during a webinar on Wednesday evening to launch a report she commissioned for the university's business school called "New Wine Into New Wineskins".

The report was launched on the eve of President Cyril Ramaphosa's formal release of an economic response to the Covid-19 pandemic. Ramaphosa will on Thursday afternoon address a joint sitting of both houses of Parliament about his plan that seeks to chart a growth path for SA's battered economy.  

The report released by Madonsela on Wednesday evening proposes seven strategic interventions to build a resilient economy that can survive the impact of the Covid-19 pandemic. These proposed interventions, states the report, will boost employment and double gross domestic production growth within a decade.

The seven strategic interventions are reforms are industrialisation, aggressive fiscal stimulus, food production, investment mobilisation, labour absorption strategies, bolstering state capacity and growth through redistribution.

South Africa's economy has been ravaged by the Covid-19 pandemic, with 2.2 million people losing their jobs in the second quarter as quarter-on-quarter GDP contracted by a record 16.4% while business confidence and manufacturing production plunged.

Economic inequalities 

Madonsela said the report illustrated that, while the Constitution reaffirmed the equality of all in South Africa, economic inequalities endured. She said it was her wish that Ramaphosa consider it in his long-term planning for South Africa's economic recovery.

"How is it that, after having adopted a Constitution, we as a country have remained unequal? The Constitution does not make us an economy. It makes us a nation. We need to establish a society where all citizens have their potential freed and their lives improved," said Madonsela.

Faculty member at the Stellenbosch University's Business School, Dr Nthabiseng Moleko, said the interventions proposed in the report had the potential to create as many as 9.8 million jobs and drive unemployment down to 12% in the space of ten years.

"It is possible to have 6.2% growth in the next decade. Alternative and bold decisions need to be taken by government, the economic cluster, unions and the private sector across the board. We must look at the necessary trade-offs so we can reach this goal," said Moleko.

Moleko said government has had various economic plans in the past 25 year, including the Growth Employment and Redistribution plan, Accelerated and Shared Growth Initiative and the current National Development Plan, which has produced the worst outcomes of the lot.

"The worst performing growth we have seen for the economy have been from the outcomes of the NDP. At 1.1% growth. That is not good enough for us to overcome the problems that we are facing. ASGISA had the best performance 3.5% and even that is not good enough," Moleko said.

Social scientist, Professor Mark Swilling, said the report was better placed to yield results than the archaic methods government has developed. While economics has been transformed in recent years, economic policy has stayed mostly stagnant.

"Many of the certainties of the past couple of decades have fallen apart. Economic paradigms usually shift after a major crisis. Now we have one of the biggest economic crises we have ever had, and we must ask what economic paradigm will inform the future," said Swilling.

The report discusses the possibility of changing the Reserve Bank’s current mandate of inflation targeting to nominal GDP targeting with a dual mandate of using monetary policy tools to help achieve a growth target of 6%, and price stability with the upper limit of 8% for the inflation rate.

It also discusses the potential to use pension funds for growth and development, ensuring that capital is used to drive national priorities, in a context where government regulations and the maintenance of good governance discourages rent seeking and misuse of pension assets.

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